Consider the following: As recently as the year 2000, 75 percent of all information stored by human societies worldwide was in analog formats such as paper documents, pictures, books, tapes and X-ray films. Just seven years later, 94 percent of all information was stored in digital electronic form.
The importance of electricity in our modern world cannot be overstated. Electricity not only animates the storehouses of human knowledge, it also enables communications and control, and delivers energy precisely to billions of devices that drive our economy—from the stock market to hospitals. It can be produced from almost any primary energy source at almost any distance from its ultimate use, supplying that energy to virtually any product or service. And, its incredible versatility has made it the energy supply source of choice for many of our major infrastructure systems over the over the last century.
A Better Paradigm: Efficient, Renewable, Distributed
Yet, as crucial and ubiquitous as it has already become, electricity is poised for a profound leap in importance. This clean, precise, and flexible energy carrier can help us conquer one of the most important challenges of our time: drastically reducing our dependence on fossil fuels. In RMI’s strategic initiative and forthcoming book, Reinventing Fire, we outline the pathways for a renewed U.S. economy powered not by fossil fuels, but largely by new sources of energy, including an efficient, renewable, distributed and customer-centric electricity system.
Let’s start with the problem. Today, we burn fossil fuels to power four-fifths of the US economy. By igniting energy stored millions of years ago, we have literally powered the engines of our prosperity. Yet many of the gravest threats to our continued prosperity are intimately intertwined with fossil fuels—global instability, terrorism, supply interruptions, price volatility, pollution and climate change. It’s time to ignite new sources of fire.
The first step: increase our productivity with every unit of energy we use across all sectors of our economy. In transportation, all vehicles—planes, trains, trucks and cars—can increase their performance while reducing their energy demand through ultra light, low drag design. In our buildings, cost-effective efficiency gains can be achieved in new and existing homes and offices. Waste heat from industrial processes can be captured and reused, and often harnessed to produce electricity. View our infographic for more on key drivers to change in each sector.
Meanwhile, we simultaneously power our increasingly efficient demand with a portfolio of renewable energy sources. Fortunately, the US has more than ample supplies of sun, wind, steam, biomass and water on and off our shores to meet current and future energy demands with existing technologies. Some sources, like biomass, can be converted into limited quantities of liquid fuel for use in planes, heavy trucks or certain industrial processes. But, by and large, we can tap this renewable abundance by harnessing the power of the electron—through electricity.
Renewing our electricity system creates the ultimate clean energy carrier that will power our passenger cars and light trucks in addition to our buildings. And, thanks to innovation in maturing renewable technologies—like wind turbines and solar photovoltaics—the cost is rapidly becoming competitive with fossil-fuel burning alternatives.
But, installing renewable energy technologies is only part of the transformation required in electricity. New operating and planning mechanisms, market structures, and enabling technologies will be critical to integrate variable renewables into grid operations. Advanced IT and demand-side technologies could provide needed distributed intelligence and operational control, while also enabling widespread availability of real-time information and market access. Customers and new players could not only find economically optimal ways of meeting their energy requirements, but also create new value propositions and opportunities for revenue generation.
Changing the Rules
While many of these changes are evolving organically, the current rules of the game in today’s electricity sector hinder a profitable transition.
Previous reforms have led to a convoluted tangle of regulations and regulatory structures that do not encourage innovation or align the profit-making incentives of conventional electricity providers with societal demands. Today’s utility business models cannot nimbly respond to change, or the evolving value propositions on the horizon. Without further direction or coordination, this transformation will be neither fast nor smooth, resulting in economic inefficiencies, misaligned incentives, and wasted energy.
The pathways outlined in Reinventing Fire can not only can help us move beyond outdated energy sources, they can enhance the physical, operational and decision- making flexibility needed to thrive in a fast-changing digital world. While we can’t predict game changing events or the speed of technology-driven transformation, we can arm ourselves to respond quickly to threats and seize opportunities when they arise. The key is to get the rules right, level the playing field and open the door for actors to make intelligent and economically optimal decisions.
At RMI, we don’t view the pathways explored in Reinventing Fire as a static answer, but as a tool to spark the inspiration, engagement, hope and innovation that will spur us all to get there. Over the coming months, RMI’s electricity practice will be partnering with sector practitioners to incubate a new approach to innovation and experimentation in the electric industry. Stay tuned for updates, and please contact us if you are a practitioner in the industry who may have interest.
So whether you care most about profits and jobs, or national security, or environmental stewardship, climate, and health, Reinventing Fire makes sense and makes money.
Rather than investing in the status quo, America’s business leaders have a prime opportunity to make smart choices and create the core industries of the new energy era while competing for a $5 trillion net prize. Reinventing Fire helps point the way.
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